By Howard Abrams, PBS Tax & Bookkeeping

I need to replace my equipment as repairs and downtime are mounting. I’m confused about obtaining a loan. How should I pay for the purchase? Where do I get a loan?

Once you have decided what you want and know the cost, you have to decide whether to buy or lease.

If you want to purchase your equipment, decide on the amount of down payment you can afford, which will then give you the amount to be financed. Shop around for the best financing available. The following are common finance sources:

Dealers – Typically they will provide financing.

Banks – Some banks are business oriented. If your bank does not loan on equipment, find a bank that does and consider changing banks.

Motor Carrier – If you are purchasing through a motor carrier, they will provide a truck purchase program.

Credit Unions – Always a good source for financing.

Obviously, compare the different finance offers. You may decide to alter the size of your down payment.

You will also need to provide current financial information and past tax returns.

Should I lease the equipment?

Leasing the equipment can offer lower monthly payments. There are open and closed end leases. If you like to stay in newer equipment, leasing may be for you. You can get into a newer rig every three or four years, easier than if you purchased the equipment.

OOIDA members who may be considering an equipment lease, can contact OOIDA’s Business Services Department at 800-444-5791. There are a number of predatory lease and lease-purchase programs out there – both via motor carriers and leasing dealerships. Having the Association review your lease agreement ahead of time could help you avoid signing on to a no-win contract.

Should I pay cash for my equipment?

We don’t typically recommend that. Tying up cash in an asset that loses value is typically not a good idea. We suggest comparing all options (listed above) and consulting with your tax and financial advisor before deciding on your best approach.

Should I borrow from my retirement plan to help with the financing?

We do not recommend using retirement plan funds for financing purposes. This could hurt your retirement plans.

I’m young and new to the trucking industry. Besides all the nuances of being a trucker, I am also concerned about saving for retirement. My parents have recommended that I start saving as early as possible. What is your advice about saving for retirement? I do have some excess money left from my income.

We are believers in starting to save for retirement as early as possible. But first you do have to have some money set aside for a so-called “rainy day.” But that aside, starting to save early is a huge plus. As an example, let’s say you want to accumulate $250,000 by making monthly contributions to a retirement plan and investing in stocks, stock funds and bonds earning 8 percent annually. Look at the chart below, which assumes you will retire at age 67.

Age Investment Saving Goal

37 Years $178/month $250,000

47 Years $439/month $250,000

57 Years $1,388/month $250,000

62 Years $3,428/month $250,000

As a further example, lowering your investment return to 7 percent annually and starting at your current age of 22, investing as little as $79 per month will yield you $280,000 by age 65. As you can see, your parents have given you great advice.

Financial planners recommend saving 10 percent of your pretax income or profit each year for retirement. Taxpayers who do not start saving until their 40s should plan on putting away 15-20 percent each year.

NOTE: We always suggest you get the advice of a portfolio manager before making any stock or bond investments. LL

This article has been presented by PBS Tax & Bookkeeping Service, a company which has been providing income tax and bookkeeping services to the trucking industry for over a quarter century. If you would like further information, please contact us at 800-697-5153. Visit our website at www.pbstax.com.

Everyone's financial situation is different. This article does not give and is not intended to give specific accounting and/or tax advice. Please consult with your own tax or accounting professional.